Snapshot Summary…

Global FX: DXY was hovering at highest levels since March where mainly strong US data last week aided USD

Global Rates: There was support from release of below consensus Japan 2Q2023 GDP but overall remain cautious as Fed enters blackout before 21 September FOMC

MYR Bonds: The market closed sideways following the widely-expected BNM decision to keep OPR unchanged the day before. USD/MYR: Alongside generally weak Asian FX versus the USD surge, the ringgit continued to lack fresh positive drivers

Macro News

South Korea: South Korea's current account remained positive for the third consecutive month, reporting a surplus of USD 3.58 billion in July 2023. This surplus was supported by a widened trade surplus and overseas dividend payments. However, it narrowed from the USD 5.87 billion surplus in June but significantly improved compared to the USD 1.7 billion surplus in July of the previous year.

Japan: 2Q2023, the Japanese economy expanded by 1.2% q/q, slightly lower than expected, marking the second consecutive quarter of growth. This growth rate, although the fastest since 2Q2022, was revised downward from a preliminary reading of 1.5%. The expansion was driven by increased in exports (3.1%) and decreased in imports (-4.4%), contributing positively to net trade. However, capital spending (-1.0%) and private consumption (-0.6%) saw downward revisions. Government spending remained flat.

Malaysia: In July 2023, employment in Malaysia continued to rise, with a 0.2% month-on-month increase, totalling 16.34 million people. The employment-topopulation ratio also improved slightly to 67.7%. Simultaneously, the number of unemployed individuals decreased by 0.4%, resulting in an unemployment rate of 3.4%, unchanged from the previous month.

Fixed Income

Global bonds: US Treasuries closed mixed last Friday, closing in a narrow range of +/- 1-2 bps and ensuring w/w losses (up 9-12 bps w/w on tenors 2Y- 10Y). There was support from release of below consensus Japan 2Q2023 GDP but overall remain cautious as Fed enters blackout before 21 September FOMC meeting and this week ECB rate decision. Germany's August CPI was +0.3% m/m, as expected (July: +0.3%), and +6.1% y/y as expected (July: +6.2%). Bund yields were little changed at 2.61%. 10Y JGB fell 1 bp to close at 0.65%.

MYR Government Bonds: Some support from lower UST yields was seen on the MGS segment last Friday. However, the market closed sideways following the widely-expected BNM decision to keep OPR unchanged the day before. Secondary trading of MGS/Gil remain muted in lieu of fresh drivers, totalling >MYR1.4 billion. The 10Y MGS ended Friday at unchanged at 3.86%.

MYR Corporate Bonds: There was mixed performance along the ringgit corporate bond market last Friday amid signs of profit taking activity and with flows dominated by financial names. However, traded volume rose to MYR692 million from MYR369 million the day prior. There was realignment along A2 rated Alliance MTNs maturing 10/30, 10/32 and 10/35 at 4.28%, 4.55% and 4.78% respectively.

Forex

US: Mainly strong US data last week aided USD. The DXY closed above 105, seen at 105.02 late Friday. Though paring down from intraday high of about 105.06, the DXY was hovering at highest levels since March. Confidence in the USD was sustained ahead of eagerly awaited US CPI data to be released in the coming week with FOMC on the horizon on 21 September.

Europe: GBP sustained weakness alongside the strong USD. Release of German CPI meeting consensus at +6.1% y/y though core inflation firmly above 5% at 5.5% y/y only provided modest EUR support, coming ahead of ECB policy meeting this week. Inflation remains considerably higher versus ECB target of 2% rate. GBP remains pressured after last week Governor Andrew Bailey said BOE is near the top of higher interest rates cycle, and that inflation was coming down.

Asia-Pacific: Japan reported its 2Q2023 GDP grew by 1.2% q/q (consensus: 1.5%; 1Q2023: 0.8%), and by 4.8% y/y (consensus: 6.0%; 1Q2023: 3.2%). The yuan ended last week at 7.344, near its weakest close since December 2007 amid China’s economic growth and credit markets risks. However, over the weekend there was upbeat macro releases as China reported Aug CPI at +0.1% y/y, vs -0.3 in July whilst Aug PPI was -3.0 y/y vs -4.4 in July.

MYR: Alongside generally weak Asian FX versus the USD surge, the ringgit continued to lack fresh positive drivers and received little support after the MPC the day before suggesting risk to growth. USD/MYR was barely changed by +0.01% to 4.677.

Source: AmInvest Research - 11 Sept 2023